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Carnival Cruise Line stock plunges after Morgan Stanley slashes price target

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Yahoo Finance Live anchors break down how cruise stocks are performing as Morgan Stanley slashes Carnival Cruise Line’s price target.

Video Transcript

- Some analysts though not so positive on Carnival Cruise Lines. The shares are plunging by 9.5%. Morgan Stanley slashing its price target to $7, warning that the cruise vacation firm's shares could lose all of their value if there would be another demand shock, that the liquidity could quickly shrink if customer deposits are suddenly withdrawn if there would be another bout of trip cancellations, for example. If we see-- I mean, obviously we don't know what is yet to happen in pandemic, if there's another variant that hit folks. So the stock really suffering.

- Yeah, it's tough to see commentary like that. And still you look at the market reaction after a large decline in Carnival shares, which you've seen here. But look, it's not just Carnival. If you get another demand shock, another pandemic like this industry has had to endure the past 2 and 1/2, almost 3 years, they also have so much debt on their balance sheet that they raised from this pandemic. And I see this point. I understand it. But it's not just Carnival. It's Norwegian Cruise Line. It's Royal Caribbean. Another shock like that can take them all down.

- Well, this is going to be the big test among the number of consumers that are the big fans of the particular travel experience that is cruises. I know I'm not one of them. However, this is kind of a cohort of travelers out there-- vacationers out there, vacationers that lean into these cruise experiences time and time again and perhaps have some of the biggest repeat rates.

And you could probably just compare that to timeshares that are out there as well. And so when we think about that cohort and the re-engagement campaigns that these companies have still had to do in order to just have enough deposits to hold on their balance sheets and if, to this point, those deposits start to get pulled back, what does that mean for the liquidity and the cash position of this company?

- Now, all these companies still have a ton of ships coming. They ordered ships many years ago. They're now starting to get delivered these ships. Unclear. What are they going to do with these ships?

- Just one quick note since you mentioned they all have this debt. He also covers Royal Caribbean. Doesn't cover Norwegian. And he's got an underweight on Royal Caribbean too.

- Did you see that news? "The New York Post" reported that there was recently a fight on a Carnival ship on the dance floor that was coming back--

- On the dance floor?

- On the dance floor.

- Was it a dance battle?

- I don't know. Apparently a brawl broke out. This was a day or two, so "New York Post" reporting that one.